In the American context, it’s always been thought that capitalism and democracy go together, that one is the precondition to the other, so that you can’t have capitalism without democracy and can’t have democracy without capitalism. Prosperity and freedom presumably require both.
We’ve learned, since the 1980s, that this proposition is no longer true. During the Cold War, it seemed it was; the Soviet Union and China were both anticapitalist and authoritarian, while the United States and its allies combined capitalism with democracy.
The duality maintained by the free, noncommunist nations, moreover, seemed to work best. In 1960, The Economist pointed out earlier this year, America, Britain, Canada, France, Italy and Japan, all democracies, dominated the world economy and accounted for 40% of global exports; the autocratic bloc, led by the Soviet Union and China, accounted for less than 4%. American GDP, furthermore, was 10 times that of communist countries on an average per-person basis.
Sixty years later, things have changed. The world’s democracies no longer have a monopoly on capitalism, nor do they dominate economically as in years past. An examination of the aforementioned Economist report (3/19/22) also indicates a dramatic swing away from democratic forms of government since circa 2010 and a corresponding rise in the number of autocracies. About three-quarters of the global population now lives in partial or complete autocracies, while only one-quarter resides in pure or nominal democracies.
More striking is the fact that the autocracies have between them 30% of world GDP, double their share at the end of the Cold War (ca. 1990), and they’ve erased much of the democracies’ previous advantage in manufacturing employment and consumer-goods production. A third of the commodities the democracies use now come from autocratic capitalist regimes, especially China, Vietnam and the Middle Eastern energy kingdoms.
Most noticeable to Americans, perhaps, leading democracies are themselves heavily invested in various autocracies through globalization, holding a third of those regimes’ direct foreign investment, investment previously concentrated internally or in other democracies. American multinationals, the worst offenders, employ three million workers in authoritarian countries, a rise of 90% in the past decade and an increase of one-third in their total outsourced employment.
Ironically, the transferring of American production to nondemocratic countries has had the perverse effect of encouraging antidemocratic forces here at home. To a large extent, the rise of Donald Trump and Trumpism is an offshoot of the deindustrialization of the US economy and the consequent impoverishment of the domestic workforce, conditions deliberately brought about by a capitalist class hell-bent on lowering business costs and boosting profits. More ironic still is that this was permitted to happen under liberal, as well as conservative, administrations and congresses going back four decades.
American Democrats, along with left-leaning politicians in the other democracies (Britain’s Labourites, German and French social democrats), championed capitalist priorities and abandoned their working-class constituents, moving rightward policywise. In turn, their constituents abandoned them. At home, this produced the four locust years of Trump, followed by the fallow years of Joe Biden, who’s seeking to recapture the status quo ante without apparently realizing what happened and why.
The upshot is that democracy itself has become imperiled throughout the free world, and autocracy is on the doorstep. Author Robert Kuttner saw this coming on the eve of the pandemic in his 2018 treatise “Can Democracy Survive Global Capitalism?” Kuttner makes the case that if free markets are allowed by ruling democratic policymakers to create economic conditions ordinary citizens can’t tolerate, those citizens will begin to opt for fascist solutions, trading off civic freedoms for economic security. The failure of the democratic left to respond to such conditions over the past generation has produced just those circumstances here and elsewhere around the democratic world; now, it’s in a fight for literal survival.
What all antidemocratic right-wing governments seizing power have in common is that they’re invariably capitalistic, installed with the support of large business and industrial interests seeking, above all, profit guarantees. Today’s reigning strongmen — Putin, Orbán, Erdogan, Modi, Bolsonaro, et al. — are without exception committed capitalists; they desire both a robust private sector and a passive labor force.
The pattern was set in 1930s Germany, whose restive working class, suffering massive Depression unemployment, was won over by Nazi public-works spending, which anticipated America’s Keynesian New Deal and ended unemployment by late 1935. Nevertheless, the key to Hitler’s success was the backing of the leading German industrialists and financiers, who early on gave him funding and enthusiastic support. The quid pro quo was Hitler’s kept promise to decapitate the troublesome trade unions and ban the socialist SPD (Social Democrats) from political life.
Der Führer was a convinced free-enterpriser — as long as business bent to his nationalist goals. “Private enterprise cannot be maintained in a democracy,” he insisted, because democracy tolerated such evils as trade unionism. Unions interfered with production efficiency and threatened proper top-down capitalist management of the economy on behalf of the State. With its egalitarian tendencies, Hitler asserted, “Democracy has laid the world in ruins.”
As un-American as those sentiments sound, there is nevertheless a movement under way to replicate them in our current political discourse, an attempt to pull the chaotic strands of autocratic Trumpism together into something resembling a formal philosophy of politics and government. The catalyst is the multi-billionaire tech entrepreneur and venture capitalist Peter Thiel (PayPal, Clarium Capital Management).
An outlier in the nominally liberal West Coast tech community, Thiel, who’s skirted the far-right fringes of Republican politics for years, has lately emerged as an intellectual guru to the forces of American authoritarianism. In 2016, he became a major advocate for Donald Trump, donating $1.25 million to the Donald’s campaign, speaking at his convention, and advising his presidential transition team. This year, Thiel’s immediate energies are engaged in electing fellow Trump acolyte J.D. Vance, whom Thiel formerly employed and mentored, to the US Senate from Ohio. But his cause célèbre is establishing himself as the philosopher prince of American autocracy under the banner of so-called National Conservatism.
Thiel’s biographer Max Chafkin (“The Contrarian”) describes the onetime libertarian as now a capitalist antidemocrat who favors some sort of nationalistic dictatorship led, apparently, by Trump or someone like Trump. Integral to that vision is the notion that capitalism and democracy are incompatible, so democracy has to go. The 1930s are calling.
Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.
From The Progressive Populist, August 1, 2022
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